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What savers can do about low interest rates

When you’re saving for something, it can be tricky to find money to put away to reach your target, so any interest earned is an important bonus. However, the low interest rates on offer for the last few years haven’t made it any easier.

The rates available from ISAs, bonds and easy-access savings accounts are all at or near their lowest levels, according to new research from the BBC and the Saving Champion website.

They found the average rate for an easy-access savings account dropped from 3% in 2012 to under 1.3% now. Rates for other types of savings were also very low.

Even worse, some accounts pay as little as 0.05% - you’d need to tuck away £100 for a year to get just five pence.

What you can do to boost the interest on your savings

Find out what you’re currently earning

The first thing to do is check the rate you’re currently getting. Don’t be surprised if it’s less than you think as unless you chose a fixed-rate interest account, the bank or building society can change what it pays at any time. The rate on many accounts also drops dramatically when bonus or fixed periods end.

If it’s low, then it’s worth seeing if there’s a better option.

Find the highest rates of interest

You might be able to move your savings to a better account with your current bank, but first take a look at normal bank accounts.

Though you wouldn’t necessarily have expected current accounts to offer decent rates, there’s so much competition right now that some banks are offering up to 5% interest – alongside extras such as cashback and switching bonuses.

Different decisions for those with big savings

The amount of money you can save in current accounts can be quite low, so if you have a bigger pot you should still see if you can move your money to a better rate elsewhere.

ISAs still have benefits, but since April this year, basic rate tax payers can earn £1,000 in interest and not pay tax on it. With the current rates so low, you’d need a lot of money before you earned that much interest – though higher rate tax payers only have an allowance of £500.

Top rates for regular savers

It’s also worth seeing if you can open a high-interest regular saver. Some banks have these accounts exclusively for their customers and offer rates as high as 6%. These are perfect for anyone saving gradually – though you usually can’t get the money until the 12-month period ends.

Regular savings accounts explained

How you can save more money

Interest helps you reach your savings goal, but you still need to be putting money aside each month. The best way to maximise this is to take the time to work out how much you can afford to save.

Often we end up spending throughout the month, and whatever is left goes towards any bigger purchases.

Instead, use a budget planner to work out how much of your salary goes on bills and essentials like food and transport; whatever is left is what you’ve got to spend for the next four weeks.

If you set yourself an allowance and stick to it, you should be left with a fixed chunk you can put into savings – in fact, setting up a standing order and moving that money every month to a different account can make a huge difference.


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